Australia Property

Investment watchdog working blind on foreign purchases of Aussie homes
THE AUSTRALIAN NOVEMBER 12, 2014 12:00AM

Rick Wallace

Journalist
Melbourne


FRESH light has been shed on the failure of the Foreign Investment Review Board’s regulation of foreign property purchases, with immigration officials admitting they don’t tell FIRB when temporary residents who have bought homes leave the country, or when their visas expire.

The revelation confirms suspicions that authorities are blind to the activities of most foreign ­investors and have no idea when they break the law by continuing to hold properties after leaving Australia.

The admission that the two agencies do not share such data will fan resentment from Australians angry about being priced out of the property market amid a wave of Chinese-led buying. It will also embolden investors looking to break the law by buying and retaining established housing in Australia, knowing that the chances of being detected are slim.

The details about the data-sharing failure came in a response from the Department of Immigration to an inquiry examining foreign investment in Australian real estate. “The department does not provide information to FIRB about clients who leave the country after the expiry of their visa,’’ departmental officials conceded in a written response to committee chairwoman, Liberal MP Kelly O’Dwyer.

The department said it was prevented from supplying the ­information because FIRB was not authorised under the ­Migration Act to receive it.

Australia permits investment in off-the-plan housing to boost supply, but it is illegal for foreigners to buy established homes in all but a few circumstances. One of those loopholes allows temporary residents to buy a home for the duration of their stay in Australia, on the proviso that it is sold within three months of their departure.

But as The Australian revealed yesterday, FIRB has issued just 17 divestment orders over the past 11 years, during which time foreigners have bought almost 30,000 ­established homes worth more than $23 billion in total.

Industry experts say the temporary resident clause is a loophole that is relentlessly exploited by foreign buyers.

Pat Conroy, a Labor MP on the committee, said he was shocked that FIRB did not have access to the data and that it had made its enforcement task far harder. “I am very surprised that Immigration doesn’t share information when visas expire with FIRB,’’ he said. “With modern databases this information could very easily be shared between departments.”

Mr Conroy said it was “incredibly laborious” for the FIRB to have to go to Immigration every time it decided to do a random check on a particular property and the system should be set up to alert FIRB when a visa-holder’s residency expired.

The Australian has previously revealed that the FIRB has failed to prosecute a single foreign investor for illegally acquiring an established home in Australia since 2006.

The committee, which reports on November 28, is expected to recommend a new application fee for foreign investors in real estate, the proceeds of which would be used to establish an effective enforcement unit within the FIRB. The report is also likely to call for better data collection and sharing, and for a new civil penalty regime.

Ms O’Dwyer has also mooted bringing lawyers, accountants and real estate agents who facilitate illegal property purchases into the new compliance dragnet.

Median price of Sydney houses breaks the $1m mark
THE AUSTRALIAN NOVEMBER 12, 2014 12:00AM

Kylar Loussikian


THE median price of a Sydney house is now more than $1 million as the city recorded September quarter price growth twice that of any other capital.

Sydney residential property prices jumped 2.7 per cent for the three months to the end of ­September, according to Bureau of Statistics figures released ­yesterday.

Melbourne, Brisbane, Adelaide and Hobart recorded increases of 1 per cent. Darwin and Canberra increased by 0.3 per cent and Perth fell back 0.1 per cent.

The ABS figures lag other measures, including RP Data numbers released earlier in the month, but are more comprehensive. Prices rose an average of 1.5 per cents across the capital ­cities for the quarter, up 9.1 per cent over 12 months.

Separately, a breakdown of home values into detached houses and apartments by SQM Research found the median asking price for a free-standing house in Sydney had this week hit $1.005m. This compared with a median house price of $646,500 in Melbourne, $547,200 in Brisbane and $485,700 in Adelaide.

But house price growth has fallen back to single figures for the first time in a year and the building of new homes continues briskly.

Housing Industry Association senior economist Shane Garrett said a lack of plots was stifling new home building, and called on governments to ­release more land. A boom in investor lending and rapidly increasing prices have narrowed rental yields across capital cities, most significantly in Sydney and Melbourne, exposing borrowers to a dependence on capital gains to build wealth.

But Tom Kennedy, an economist at JPMorgan, said while property yields were low, there was also a low return from record low interest rates, helping lift the property sector.

(11-11-2014, 10:10 PM)greengiraffe Wrote: House prices up 1.5pc in September quarter: ABS
AAP NOVEMBER 11, 2014 2:41PM

CAPITAL city house prices are coming off the boil, but Sydney continues to boom.

Sydney property prices jumped almost 15 per cent in the year to September, according to new figures from the Australian Bureau of Statistics.

The gains in the harbour city were double those in Melbourne and Brisbane, and six times those in Canberra.

Capital city house prices overall rose nine per cent in the year, having slowed from the 10 per cent annual rise in the June quarter.

Prices rose 1.5 per cent in the September quarter, compared with 1.9 per cent in the previous three months.

JP Morgan economist Tom Kennedy said national house prices were slowing to more sustainable levels.

“The growth we saw last year can’t be sustained and that could lead to problems if it did,” he said.

“The fact that we’ve slowed down is probably a good thing and we think it’ll probably slow down a little more.”

Perth was the only capital city to experience price falls in the quarter, down 0.1 per cent.

Easing mining investment has dampened demand for labour, slowing population growth and, therefore, house price growth, Mr Kennedy said.

Housing Industry Association senior economist Shane Garrett said national home price growth was easing to a more sustainable rate, as more supply came into the market.

“The annual rate of home price growth nationally is back in single figures for the first time in a year,” he said.

“At the same time, new home building is stretching to its busiest year in two decades. This is no coincidence.”

Commonwealth Bank senior economist Michael Workman said an increase in housing supply over the next year would slow house price growth in Sydney, Melbourne and Brisbane.

“It’s quite clear in most of the data that it’s the eastern seaboard where most of the activity, price wise, is occurring,” Mr Workman said.

“It’s also where most of the new building is underway and there’s a lot of new stock coming over the next year, so there will be this change in the market that will dampen house price growth over the coming year.

“By this time next year, the numbers will be quite low compared to where they are right now.”

He said some parts of the housing market, such as the Gold Coast, would benefit as the lower Australian dollar would eventually boost tourism.

CAPITAL CITY HOUSE PRICES IN THE YEAR TO SEPTEMBER:

* Sydney — rose 14.6pc

* Melbourne — rose 6.9pc

* Perth — rose 6.7pc

* Brisbane — rose 5.6pc

* Adelaide — rose 3.7pc

* Hobart — rose 4.3pc

* Darwin — rose 3.4pc

* Canberra — rose 2.4pc

AAP

Hot residential market drives boom in prices for apartment sites
FRANK GELBER THE AUSTRALIAN NOVEMBER 13, 2014 12:00AM

WHAT should we do about the crazy prices being offered for commercial properties earmarked for residential conversion? Buyers are paying more for potential apartment sites than these properties are worth as ­office buildings.

These are not normal times and it won’t last much longer, particularly in Melbourne.

The boom in apartment sites is a market anomaly driven by the bullish residential property market. It’s all about their suitability for development and the attractiveness as a high-rise residential location. High-rise projects need a large enough land area and appropriate zoning potential. The boom is not just in inner and near city sites, but it’s also affecting suburban office locations.

The strength in residential property markets and prices in new residential developments has underpinned financial feasibilities, allowing a stronger residual value for sites. In particular, overseas developers willing to take on projects at lower margins than the norm in Australia has boosted the amount being paid for sites.

In many cases, offers for office properties capable of conversion to apartments have been fielded at 30-50 per cent above their valuation. I’ve seen double and that’s hard to resist. Real estate agents have been pitching many commercial property sales towards this market.

For commercial property owners, this is a window of opportunity to realise assets at prices well above normal market levels. If these properties remained as ­offices, even optimistic forecasts would not see the prices currently being achieved this decade.

It doesn’t make sense to refurbish or redevelop secondary office buildings in the current environment. In Sydney and Melbourne, prices are barely at replacement cost, making the financial feasibility for development difficult. Only premium buildings on low costs sites will work.

In fact, it doesn’t make sense to resist the prices being paid as residential sites. But what to do with the money? We may not be able to buy commercial property at sensible prices in the current market.

We shouldn’t confuse this with the strong prices and firming yields for prime property, as both domestic and overseas investors take positions in the Australian markets. And that has flowed on to secondary properties and locations. Super funds, real estate investment trusts and overseas pension funds have been looking for long leases and secure cashflows in quality commercial buildings. The interest seems to be driven by in the greater yield for commercial property relative to bonds, both here and overseas.

I wonder what will happen as bond yields rise significantly over the next few years. My expectation is that demand from this source will dry up and that some of the money will go back to bonds. The lower discount rates and internal rate of returns that institutional investors seem willing to accept now could evaporate. Other things being equal, that would lead to a softening of yields for commercial property.

But other things aren’t equal. While prospects differ city by city, the cities with strong office markets will be relatively sheltered from this effect as the cycle runs its course. So what will we do with the money? Should we invest now looking for higher returns later on? Will increased site values for residential use stick?

I don’t think so. Nothing fundamental has changed about commercial property. We can’t afford to pay over the odds for property without affecting returns. In any case, the only office markets with good medium-term prospects are Sydney and Melbourne. But, given prospective continued weakness of the economy, and hence office demand, even they will be slow to recover.

The real question is how long the residential upswing will last. We can’t compete with the prices being paid for residential sites. But the residential upturn won’t last forever. It’s a window, shorter in Melbourne than Sydney. And site prices will return to more normal levels once it’s over.

Meanwhile, on a positive note we’ll see substantial urban renewal of older commercial buildings as residential uses. The problem is that, while it lasts, the development boom will take away potential commercial sites. Should we protect commercial sites in the cities? But that’s an economic development issue.

Where appropriate, it makes financial sense for investors to take the money and run — perhaps with a view to returning to the market, now if there are appropriate properties, or later when the residential cycles run their course. Meanwhile, be patient. Be aware that demand for residential sites has taken some commercial property prices too high. Make sure we understand the difference between being priced as a commercial property or as a residential site. Stick to your guns and wait until investment makes financial sense.

There will be opportunities for sensible investment. I suspect we won’t have to wait too long.

Frank Gelber is chief economist for BIS Shrapnel. fgelber@bis.com.au

Casino scion says tax will determine more Chinese buys

Matthew Cranston
353 words
14 Nov 2014
The Australian Financial Review
AFNR
English
Copyright 2014. Fairfax Media Management Pty Limited.

The daughter of Macau casino legend Stanley Ho and managing director of conglomerate Shun Tak Holdings Pansy Ho says tax rules will determine future Chinese investment into Australia.

Unsurprised at the wave of Chinese capital, Ms Ho said Australia attracted offshore funds because it is stable and offers a good quality of life.

Speaking at the G20 Summit in Brisbane on Thursday, Ms Ho said Chinese customers would be tough to predict for Australian casino interests wanting to cash in on Chinese tourism.

"In the long run I think this investment is natural because Australia is a place where mainland Chinese people are comfortable travelling to," she said.

Ms Ho said that the level of real estate investment was similar to many other countries around the world and that a key driver would be taxation policies.

"We have real estate investments in Europe and we have seen exactly the same development there as in Australia," she said.

Ms Ho warned the two proponents of Brisbane's next casino project to be careful about trying to predict what Chinese customers want.

James Packer's Crown Resorts has teamed up with up with Chinese property developer Greenland Holdings Group while Echo Entertainment Group has teamed up with Chinese property developers Chow Tai Fook and Far East Consortium. Both have lodged their proposals with the Newman government.

"We tried to predict what Chinese customers are going to be like but you can never think you can know them enough simply because its a very big country and they are going through a very quick learning curve," Ms Ho said.

Ms Ho's brother Lawrence is a joint venture partner with James Packer in Melco Crown – a Hong Kong-based casino company developing new casinos in Macau and the Philippines.

"Whatever you build today might be obsolete in a few years' time, so it is rather how committed the investors are with the project and how much they care about differentiating, not just to capture more customers but to showcase what Australia has to offer."


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Big-spending Chinese buyers ‘a boost for Australian housing’
THE AUSTRALIAN NOVEMBER 15, 2014 12:00AM

Turi Condon

Property Editor
Sydney
CHINESE buyers have brought Australia’s mansion sales back to life and are underpinning prices by at least 10 per cent across Sydney and Melbourne, according to ­developer Harry Triguboff.

Mr Triguboff’s granddaughter missed out last month on a prestige home in Sydney’s exclusive eastern suburb of Vaucluse. “She was willing to pay $4.7 million, but a Chinese buyer bought the house before auction,’’ he said. “He paid $5.5m. I would have paid $5m.”

Mr Triguboff, whose Meriton group sells 20 per cent of the 3000 units a year it builds to offshore buyers and 70 per cent to local buyers of Chinese origin, is philosophical about the sale. “We are always concerned that foreigners are keeping our children without ownership of houses. Without the Chinese, there would be no houses in the first place,” he said.

Top suburbs for house and unit value growth

The sale made that vendor wealthier, Mr Triguboff said, but there was a bigger picture, with foreign investment having a multiplier effect. Offshore buyers created confidence in the level of house prices, while their presence flowed on to job creation in construction and associated industries, he said.

Local councils gained $20,000 for each new unit built through ­developer contributions, which went to roads, parks and public works. The Residential Development Council estimates that about 8 per cent of new homes — or 15,0000 out of total new dwellings of 180,000 — were sold to offshore buyers last financial year.

GALLERY Do funny names affect property prices

Foreign investment approvals to buy new dwellings doubled in the last financial year, ­increasing from $4.22 billion to close to $10bn in Victoria, and $4.24bn to about $10.3bn in NSW, the council said.

Property Council chief executive Ken Morrison said dwelling starts would not be at their currently high levels without offshore investment. “Foreign investment means developers are able to hit their pre-sale targets faster, therefore commencing construction and getting product to market earlier,’’ he said. “That’s good for housing supply and eases price pressures into the future.”

Not many of the top-end properties had been snapped up by offshore buyers, according to RP Data researcher Cameron Kusher.

However, he noted it was often difficult to tell whether a property had been sold to local buyers of Chinese origin — Australian citizens, permanent and temporary residents — or to a citizen of another country. A parliamentary inquiry into real estate purchases by overseas buyers is due to report this month and could recommend tougher penalties for breaches of foreign investment rules.

Uneven price surge in Sydney, Melbourne

In Sydney’s eastern suburbs, McGrath Estate Agents partner Ben Collier said the majority of sales above $30m had been to Chin­ese buyers, but they were dominant only in very specific areas and types of homes. “In the $15m-plus or $30m-plus market, Chinese buyers want contemp­orary-style homes with bridge and city views,” Mr Collier said.

Last month, recruitment queen Julia Ross sold her Sydney home in Point Piper for $39m to Chinese billionaire Xu ­Jiayin. Also in October, a Shanghai-born Australian resident purchased the late hotelier Salvatore Paino’s Point Piper home for $30m, with plans to knock it down and build a new one.

Chinese cash injection not going anywhere soon

Samantha Hutchinson
321 words
15 Nov 2014
The Australian Financial Review
AFNR
English
Copyright 2014. Fairfax Media Management Pty Limited.

The propensity of Chinese investors to fund Australian developments through equity rather than debt has experts expecting the investments will be ­longer-lived and more stable than the Japanese foray of the 1980s.

Chinese investors are expected to pour more than $40 billion into the market in the next decade, with a ­substantial proportion flowing into property. And while long-term property investors may have fears the influx will end as quickly as it began, experts are confident the trend is far more­ sustainable than the Japanese experience.

"This time it's different because the Japanese were funded primarily by debt, whereas the Chinese have equity in all of their developments," Savills research head Tony Crabb said.

"The Chinese economy is already one of the biggest economies in the world, but on a per capita basis, its outflows are still relatively small . . . on that basis, it can still grow another five or six times. We haven't seen anything like it."

Savills analysts expect Chinese ­offshore direct investments will reach more than $US2 trillion ($2.3 trillion) before the end of the decade, with Australia in line to receive about 2 per cent of that. And while investment outflows might flatten, the analysts are certain they will continue to move upward.

"The only thing that could possibly change the current trend would be for investment rules to change in China, and we just don't see that happening," Mr Crabb said.

Chinese sovereign wealth funds and state-owned developers, such as ­Greenland or Chinese Investment ­Corporation, are well established in Australia, but the mix of property ­investors is expected to broaden, Mr Crabb said. Chinese conglomerates, insurance companies and a greater number of ­wealthy individuals will make up the next wave of Chinese investment in Australia as they seek exposure to a property ­market that is not correlated with ­Chinese cycles.


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Location, location and still Location... Moreover Australia is a big continent...

Uneven property rises push up home prices
THE AUSTRALIAN NOVEMBER 15, 2014 12:00AM

IT’s no secret home prices have surged in Sydney and Melbourne over the past year, but uneven price rises have pushed some suburbs up by more than 40 per cent, according to the National Australia Bank.

Median prices surged 43.7 per cent in Ramsgate Beach, near Rockdale in Sydney’s southeast, in the past 12 months, according to NAB’s Australian Housing Market Report, hitting $1.43m.

There were also strong rises in Sydney’s inner-western suburbs of Rhodes and Homebush, up about 43 per cent in the period, compared with a 14 per cent year-on-year increase in Sydney to the end of September.

Top suburbs for house and unit value growth

In Melbourne, the median Ripponlea house price surged 40.9 per cent to hit $1.043m. Middle Park, Caulfield East and Canterbury were all up more than 30 per cent, compared with 6.9 per cent for the entire metropolitan area.

Even other capitals, where growth was slower, had suburbs recording surging prices. Perth, which recorded overall annual price growth of 3.7 per cent according to Australian Bureau of Statistics figures out earlier this week, had big price increases in its northern suburbs.

Chinese sales 'a boon for housing'

Prices in Alkimos, in the city’s northern fringes, rose 28.6 per cent in a year, followed by Coolbinia, Highgate and Kallaroo, all up more than 21 per cent.

But the NAB report rang alarm bells over Perth’s rental market amid sluggish rent growth across the country.

Two NSW towns, Brewarrina in the state’s central far north, and Hillston in the central west, recorded the biggest jumps in house prices, up 48.5 per cent and 45.3 per cent respectively. But the lack of turnover in those towns means a small number of expensive property sales would significantly influence the figures.

Same as before, funded by debt, only that debt is raised fron bond issues in HK or mainland.

Anything affecting their cashflow would see these companies leaving or dumping assets.

via tapatalk

Then you have to check on who is the one that sanction such offshore lendings lor...

(15-11-2014, 03:35 PM)BlueKelah Wrote: Same as before, funded by debt, only that debt is raised fron bond issues in HK or mainland.

Anything affecting their cashflow would see these companies leaving or dumping assets.

via tapatalk

Investment in provincial areas rises

Larry Schlesinger
515 words
13 Nov 2014
The Australian Financial Review
AFNR
English
Copyright 2014. Fairfax Media Management Pty Limited.

Cheaper prices, higher yields, low vacancy rates and good growth ­prospects are driving more residential investors to buy in regional locations.

They are showing strong ­interest in regional towns like Port Pirie, 220 kilometres north of Adelaide, the New England region of NSW, the Victorian regional hub of Ballarat, Cairns in far north Queensland and even parts of Tasmania, according to figures compiled by tax depreciation specialists BMT.

BMT analysed tax depreciation schedules requested over the past two financial years to see which locations showed the strongest growth.

These schedules are prepared for property investors as a guide on what they can claim in their annual tax returns, so provide a good indication of preferred investment locations.

They showed that individual rural and regional locations significantly ­outpaced the statewide average ­activity growth found in South ­Australia, NSW and Victoria, where growth in depreciation schedules averaged about 20 per cent.

"With many capital cities experiencing considerable capital gains over the past few years, some investors appear to be seeking out alternate market ­segments in order to enter the market faster and at a lower price, while still realising a solid return," said BMT ­managing director Brad Beer.

Some of the big gains such as in Port Pirie and Riverland were made off smaller numbers, but in regional hubs like Logan City (between Brisbane and the Gold Coast), Ovens in north-east Victoria (including Wangaratta and Wodonga), Ballarat and Cairns, growth was double or more the state average and off much bigger numbers.

Ross Moller, principal at LJ Hooker Cairns Edge Hill, said investors were buying into Cairns from Darwin, ­Sydney Melbourne and Adelaide.

"They're getting a much better return on the purchase price. Gross yields are between 6 and 7 per cent. In some cases they are buying units below replacement cost, with vacancy rates at about 2 per cent," Mr Moller said.

"There's a lot of investors looking to buy through their self-managed super funds," he added.

Mr Moller said Cairns had been ­revitalised, with the weaker Australian dollar assisting the local tourism ­market and new projects under way.

"[Singapore's] Aspial Corporation has a development application to build 400 units here while Silk Air have announced they will start flying into Cairns from June next year," he said.

In Ballarat, excellent returns and a low entry point have attracted ­investors, said veteran agent Ron ­Morrison of Ballarat Real Estate.

"We are seeing a high volume of ­people investing in Ballarat because of the marvellous returns. You can buy a brick veneer house for $250,000 and lease it out for $250 to $270 a week.

"We're getting a lot of WA investors with high income to spend. Ballarat is a good, solid city. We don't have the enormous gyration in prices you see in the capital cities," Mr Morrison said.

Key points Rural and regional growth is outpacing statewide averages for SA, NSW and Victoria, Regional properties allow investors to access the market faster and at a lower price, says BMT.


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